A view from the Center

Deloitte's Life Sciences & Health Care Blog

The price is right? Making the case for innovation

The headlines always create a stir. A new drug is coming to market with a price tag over $100,000. For consumers, it’s sticker shock. For health plans, an expensive product they weren’t expecting to cover. For skeptical legislators, evidence of an industry in need of tougher pricing controls.

Without question, life sciences companies and investors face formidable challenges in bringing life-changing products to market. The risk/reward equation for the industry has always been a tightrope walk, and the tradeoff seems to be getting steeper.

Value-based care (VBC) is quickly becoming the rule, not the exception, accelerating the shift to a market that aims to cut cost and improve outcomes. Financial risk is shifting to providers and others, changing how they evaluate innovation. Sometimes, as discussed in the Deloitte Center for Health Solutions paper, Delivering medical innovation in a value-based world, these stakeholders must make tough decisions on when to use a new treatment.

This market dynamic has created a conundrum for biopharma companies determined to bring medical innovation to the market. What’s the likelihood of a new product being adopted?

Stakeholders are asking: What’s the value of a new drug? Some third party organizations are starting to build value assessment frameworks to try to define and solve the value equation. But biopharma executives know their products better than anyone else, and they should ask themselves: How do we convince stakeholders of the value new drugs bring?

So how can biopharma operate more efficiently without sacrificing the commitment to R&D? Refocusing R&D efforts to aim not only at delivering strong science, but also improving clinical processes and financial goals, is a start. Products need to demonstrate clinical and economic differentiation to achieve the expected results commercially.  Specifically, health plans and providers want to improve on quality measures, and biopharma companies should pay attention to what those are, incorporate them into clinical trials, and engage in the dialogue about changing them to reflect scientific advances.

Second, stronger data capabilities are becoming critical. All successful companies in the industry recognize the value of an enhanced evidence engine, but investments have been insufficient. Many companies may have the will, but not the full commitment to infrastructure, data collection and usage. Producing applicable data early in the R&D process can open the door to better commercial viability.

Finally, organizational siloes need to come down within the four walls of the biopharma organization and across the health care industry. A more streamlined flow of information across the biopharma enterprise is essential to focus on programs and products that could have commercial viability.

VBC concepts are built on the idea of efficiency, transparency and an eye on the bottom line. Siloes across the industry impede those goals.  All stakeholders, including health plans, providers, biopharma companies, legislators, and consumers, should work collectively towards achieving value-based goals, and ensuring that patients continue to have access to life-changing medical innovation.

Author bio

Ralph is a principal in Deloitte Consulting LLP’s Life Sciences consulting practice and biopharma sector leader. With over 18 years of experience, his work includes developing and executing strategic and operational initiatives broadly across the Life Sciences value chain. Ralph has led the development and assessment of innovative collaborations for discovery and early development, global operating development and design, and executed large scale R&D business model transformations.